Tag Archives: personal finance

Finance = money & money = sexy. If only my 13-year-old self had known that

money is the most important thing - financial literacy and financial education

In which I reflect on my financial education to date, inspired by Blonde on a Budget’s post about financial literacy in schools.

My first memory of year 9 maths in high school is being teamed up with two others, going to the local supermarket  and calculating what food and supplies would cost for a family for a week. Let me tell you, it’s really awkward talking about toilet paper and tampons with people you barely know…

But that wasn’t my first foray into this kind of thing.  I’ve long known the value of a dollar.

Growing up, I literally do not recall seeing my mother ever buy anything that wasn’t on sale. When I was about 10, my best friend and I went to the supermarket to buy snacks and drinks. We were super proud about finding a 1-litre Coke for $1 and gushed about our frugality to her dad.

“That’s a good buy,” he said, and smiled. But when I told my mum about it later on? Her reaction: I can get 1.5 litres or 2 litres for the same price. Way to shoot down the kids, but she’s always been the bargain queen, and a blunt one at that.

Shortly after that I got my first paying gig, a paper run, and later on I would work TWO jobs in high school so I could buy an electric guitar and amp. I’ve always, always saved. I couldn’t really say why, as for years there was nothing I was saving for; I just knew it was the thing to do. Somehow my parents instilled that in me (thanks guys).

Business as a subject, though? I thought it was deadly dull and wanted nothing to do with it. Business studies was compulsory for a little while (maybe over the duration of one term) early in high school. You could then go on to do accounting or economics, and as you can probably guess, I chose not to do either. My mother is an accountant, something I thought was the most unimaginative and boring thing one could possibly be, and economics held no draw for me, either.

Of course, the older I get the more important I realise all of that is. Getting a grip on how the economy works is kind of a basic requirement of adulthood, I reckon. 

Knowing how the official cash rate impacts interest rates, for example – that affects savers and borrowers alike.

Understanding general business principles too, which will serve most of us well because most of us do wind up in business, one way or another, to some degree. Yes, even those of us who pursue creative fields – who in many ways would benefit MOST from learning what being a professional in a capitalist society really involves. I‘m in an industry trying to figure out how to make money to sustain itself, and understanding the market and customers is vital to that. And amazingly, I’m finding this is actually quite interesting – and challenging.

I also believe understanding finance from a broader point of view is invaluable. While I’ve never been hugely interested in passive income – I like my work and don’t have any ambitions to retire early – recently I’ve been thinking about income security and growth. It really hit home for me that apart from trading your time for money, there are only a few paths to earning income. Here’s how I see them:

  • Investing in the stockmarket
  • Investing in real estate
  • Producing products (presumably digital) that you create once and then continue to sell indefinitely, no extra effort required on your part

It would  have been good to learn some of this stuff in school, because, um, who DOESN’T want to make money? Everyone, even high school kids (maybe ESPECIALLY high school kids) is interested in making more money.

I’m not saying there aren’t opportunities to learn and get involved in this kind of thing. For example, there are student stockmarket challenges you can participate in –  one of my classmates did really well on those, making a ton of (theoretical) cash. But that kind of thing didn’t interest me back then, and in fact kind of intimidated me, so I didn’t seek them out. Also, it was all kinda nerdy and I was desperately trying to escape the pigeonhole of nerd-dom back then.

How things change. Money is sexy. I know that now. I REPENT. 

How to deal with a layoff gracefully: Advice for couples

how to deal with a layoff gracefully
Like I blogged just last week, sometimes I feel like we’re never going to get ahead financially.  Still, things are what they are and whinging never got anyone anywhere.

That said, I’m big on honesty and I’m not going to lie, being forced back into one-income land sucks. Of course, it’s even worse for T, but I’m not particularly enjoying things either. Selfish? Yes. True? Abso-frickin-lutely.

Rather than subject you all to a wave of self-pity, I thought I’d consult some other smart bloggers about coping in the aftermath of a layoff and dealing with all the feelings that follow – gracefully. Here is our collective wisdom.

Be mad, but then shake it off

You will resent being the only one bringing in an income (particularly if your partner is not a good housekeeper, on top of it all). Acknowledge it, but remember that nobody is winning in this situation and try to move past the anger. Definitely do not lash out!

As Gina Marie Rose sagely observes: “I know it’s hard not to feel resentful toward your partner when you’re the only one bringing in money, but do your best not to make them feel guilty about it. Trust me, your partner does not want to be unemployed, broke, and having someone else support them financially.

“But sometimes, shit happens and we have to face circumstances that are out of our control, like layoffs. Being unemployed and broke is one of the worst predicaments in the world; the last thing your partner needs is for the one person they love most to make them feel even worse about it.”

Michelle from Fit is the New Poor says: “I often reminded myself how much I loved him and how he was there for me financially and emotionally in the past. He did his part by understanding when I needed space or to blow off steam.”

Sally from Tiny Apartment Design, for one, has left several jobs during her relationship. “It’s tough when you feel like you are carrying the weight of two people, but I find it helps to talk about it, uncomfortable as it is,” she says.

Vent to someone else

Let it all out … but not just to your partner.

Gina suggests venting to people you trust and who you know won’t change their opinion of your partner as a result.

And find some stress relievers that work for you.

“During the whole time Chris was unemployed, I practiced yoga 3-4 times a week. Probably one of the best decisions I made during that time!”

Lend an ear

And of course, let your partner vent too.

Says Gina: “Listen to them vent about their recent job rejection. Ask how that networking event was that they recently attended. Let them cry on your shoulder when they feel hopeless and like they’ll never get a job. Being unemployed and broke sucks big time, so be supportive. You’d want the same from your partner if you were in their shoes.”

Focus on the silver linings

No job is perfect. So take the opportunity to remember all the downsides of that old job, and thank your lucky stars that you guys no longer have to deal with them!

According to  Michelle: “I would be mad at him for losing his job, but then I would remember all the times he would complain about his boss making him stay late or emotionally abusing him, and I would go back to thinking that this may be a better way!”

Be supportive on the job-hunting front

Not that this really needs stating, since you BOTH want to get back to the full-employment bandwagon…

Check your partner’s resume, edit cover letters, trawl your list of contacts for anyone who might be helpful to him, keep an eye out for interesting job listings, rehearse answers for interviews.

“I remember the first time Chris did an interview role play with me: it helped me memorise my answers better and feel more confident when it came to saying them out loud,” Gina says.

Michelle suggests asking the hard questions your partner might not consider, be it in regard to interviewing or to choosing jobs.

Keep a tight lid on your finances

Now, more than ever, is the time to keep on top of your money. I revisited our 2014 budget but the key is tracking our spending, especially with T’s habits.

“Since you’re now providing for two people, it’s probably a good idea to keep a close eye on your finances so you can save money where possible,” Gina says. “I didn’t do this while I supported Chris, and I regret it! I feel like my money went so fast during that time because I wasn’t keeping track of what was going in and what was going out, and I didn’t change my spending habits even when money got tight.”

Budget in little treats

Much as I would like to forbid T from spending a single dollar until he finds a job, that’s pretty cruel and also insanely unrealistic. We’ve settled on $20 a week, although in reality that’s creeping higher.

Gina’s advice? Treat your partner once in awhile.

“While I was unemployed, I was depressed because not only did it seem like no one would hire me, but I didn’t have any money to go out and do things or treat myself. Chris saw how depressed I was and decided to take me out to lunch/dinner/a movie every so often to help get my mind off my job search. He also spoiled me rotten for Christmas. (Being unemployed during the holidays is the worse because it’s a season of spending buy you have nothing to spend!)

“When Chris was unemployed, I treated us to a little getaway to Santa Cruz for a couple days. Do what you can afford and know that your partner REALLY appreciates the distraction.”

Michelle encouraged her husband to be active outside of the home while unemployed. “He was depressed, obviously, but we would still go out with friends or on (cheaper) dates. I would also put him in charge of dinner so he felt like he had a purpose and was “paying me back.” Our house was spotless for the time he was unemployed!”

And plan to celebrate when your partner finally lands that job.

“We ended up going on vacation with our travel miles. I think all of that kept a ‘light at the end of the tunnel’ feeling going for us when we felt like our situation would never change.”

I’ll wrap up with this succinct summary from Michelle:

“Celebrate the good because there won’t be much of it, remind yourself that you love him despite his situation, give him tasks and jobs to do to keep him active, and try to think of an awesome celebration for when he does get a job!”

Do you have any pearls to add?

What we spent: February 2014

Click here for more info on my monthly spending roundups – your question will probably be answered there.

what we spent feb 2014 nzmuse  

So, some big medical expenses last month!

Financially speaking, it was not the smartest to have my wisdom teeth out right now. But the pain was getting bad, and T being off work meant he could help look after me while I recovered.

Physically speaking, it really wasn’t anywhere near as awful as I’d imagined – details here. And financially, it wasn’t as bad as I’d worried, either – only $1050 for all four out, the rest of it being for the initial checkup, clean and x-rays, plus the meds I had to get afterwards. (White Cross Dental New Lynn, highly recommended!)

I’ve considered applying for health insurance a few times over the years; Southern Cross has a partnership of some sort with many workplaces, including my current and previous employers. But the numbers just don’t make sense. We are pretty healthy - our  issues are generally accidents/emergencies on T’s part (the ER is free; the time off work not so much) and optical for me. Basic health insurance plans in NZ don’t tend to cover optical and dental; those add-ons cost more and aren’t worth it, and none of them ever cover the cost of wisdom teeth extraction.

In other less wise moves, we also went out to a late Valentine’s dinner after the layoff – we’d been putting it off until the week after the day because of work, which turned out to be … interesting timing. But I’m pretty happy with our dining out spending, and totally stoked with our grocery spending (we’ve definitely been spending less since we returned to NZ, thanks to our new eating habits and smaller appetites).

Seeing as T was laid off halfway through the month, his spending is definitely on the high side (that’s more like a full working month allowance…) But there’s no point going on and on about it. It’s always going to be a point of contention, which is the whole reason for a don’t-ask-don’t-tell allowance.

Thinking about the future … I veer between extreme optimism and hopelessness. Right now, it’s definitely skewed towards the latter. I keep thinking we’ll never be able to save for a down payment (previously, there were moments where I was thinking that given the money some of T’s colleagues make in a year, it might actually be within reach in a couple years! So much for that).

I honestly see no way for house prices here to fall unless something is done to stop both investors and nonresidents/citizens buying property, which isn’t going to happen. So I guess we wait until the next recession – and hope we don’t lose our jobs in it.

Women’s Money Week: Kids. Who’d have ‘em?

This post is part of Women’s Money Week 2014.

They say you tend to most regret the things you don’t do, rather the things you did. (That’s one of the things that convinced me I had to take time off to travel in 2013.)

Does that apply to having children?

(Potential TMI ahead in next paragraph)

I freaked myself out a while ago when I noticed I had unusually sore, full boobs (by my standards. I have NO idea how women with actual chests exercise comfortably. Going running that week was frickin’ agonising). It was coming up to that time of month, but not quite. Naturally, I was half-convinced I must be knocked up and went into minor panic mode.

That made me realise – with a jolt – that if I was, we would most probably have it. I guess you’d say I’m at the stage in life now where having a kid would only be slightly disastrous (say, 8/10) as opposed to deliriously disastrous (10/10). Two of my friends are apparently already in debate about who is going to be the better uncle to my future offspring. Bless their wacky little hearts.

But the one thing I really, truly want to accomplish before having kids is buying a house. I want the stability, I want the quality (if it’s a damp house, at least we can insulate it), and I know if we have a kid first it’s going to be virtually impossible to save what we need for a deposit.

And then there’s all the finances around actually having one – I’m not fussed about THINGS for a baby as such, like clothes and car seats and cots … but rather leave from work, childcare, etc. I’d really like for T to have a more established career. We can live off my income for now while he job hunts, but it’s certainly not the ideal, and neither of us earns enough that it would be easy for one of us to stay home with a kid.

Unlike a lot of people who grew up in a family where money was tight, who as adults are determined to be financially secure before they have a family, T thinks I’m overly conservative on this front. (It may also have something to do with the fact that he has worked with/socialised with so many less well off people who’ve had kids in their teens/early 20s – who certainly don’t have it easy, but get by nonetheless. His younger brother, for one, is about to join that club.)

Financial stress SUCKS. Been there, done that, with T right there alongside. And adding a tiny human being into that kind of toxic mix is one hot mess I never want any part of. Money buys peace of mind, and a LOT of things that bring happiness.

No, he’s generally more concerned with being too old to ‘enjoy’ our kids rather than being able to comfortably provide. I sympathise with this sentiment on the surface but try as I may, I just can’t empathise with it. My parents had me in their 30s, and their age never had any impact on my upbringing, which no doubt plays a large part in that.

As with a lot of things, there’s never a perfect time. There sure are some better and some worse times, though, and we haven’t gotten into the territory of the former yet.

How do you think your childhood/family environment shaped your thoughts and feelings about having kids of your own? Would you be ready to have one right now (if you found yourself in that situation?)

Guest post: The Urgency of the Emergency (fund)

Today’s post is courtesy of Jacob, Ph.D. student in finance, frugal master, and one half of the Cash Cow Couple. Along with his wife, he enjoys living, laughing, and teaching others how to save and intelligently invest their money so that they can achieve financial freedom.

 In the blogosphere, it’s common to see recommendations for emergency funds. I’ve seen some who claim an emergency fund is unnecessary, and others who’d prefer if you kept one the size of Texas. There isn’t anything inherently wrong with either choice, but you should probably understand time constraints and liquidity before you decide on an emergency fund or any other short term investment need.

Let’s first define an emergency fund. It’s typically a highly accessible chunk of money stored in a checking, savings, or money market fund. It’s there for what? That’s right, emergencies.

But what does highly accessible mean, and why does it matter? Well, we’re speaking of liquidity here.

Liquidity is often defined as the ease with which a portfolio can satisfy an investor’s needs. Easy enough. But what comes next is frequently confused by investors, popular media, and everyone in between. Liquidity is comprised of two parts – marketability and price volatility.

  1. Marketability is an attribute that measures an investor’s ability to readily convert an investment to cash at prevailing market prices. This would be a function of fees, trading volume, and bid-ask spreads. In other words, the greater the cost of finding a willing buyer, the less marketable, and therefore less liquid an asset is.

  2. Price Volatility is very different. Even if you can sell an asset quickly at market price, you must still be concerned with the current market price. Stocks are a great example because they are volatile and therefore not liquid. Sure, you can easily sell a stock after it falls 50%, but you’ll be locking in huge losses.

A great example is a story I heard about a lady who was advised to put her million dollar portfolio in an easily accessible S&P 500 index fund. She was under the assumption that it was liquid. Sadly, one of her goals was to purchase a $500,000 boat in just over one year.  Of course, 100% equities is a terrible decision if you need half the principal in a year. The market fell nearly 40% and she was then in a terrible position deciding between the boat and almost no remaining savings.

The point of that story is simple. Don’t put your emergency fund or short term goal funds into the stock market. Doing so defeats the entire purpose of planning ahead. Keep the funds in a liquid account like the American Express high yield savings account that we use.

A matter of size

The next thing to consider is the size of your emergency funds. You’ve probably heard the rule of thumb that says 3-6 months of living expenses in your emergency fund. Maybe you heard 3-6 months of income. Whatever you heard may or may not be applicable to your financial situation. (Ed: No matter how much I have saved, it never feels like enough…)

There are several considerations here. First let’s consider employment and income fluctuations. If you are steadily employed, you probably need a smaller emergency fund than a traveling freelance writer with a variable income. Any variability requires an increased cushion.  The reason is simple; you must cover baseline expenses, and if your income doesn’t show up for 2 months, you’ll probably appreciate the protection that accompanies an emergency fund.

Likewise, if you spend far less than you earn each month, you’ll need less than someone who is living paycheck to paycheck. It’s just basic math. You have much more freedom and flexibility when you have excess funds coming in once or twice a month. You can quickly adapt to the situation at hand.

If you’re a young or old retiree, things are much different. Because you are living on your investment portfolio, you have much more concern with price volatility in the stock market (if you own equities).

Consider someone who must sell $20,000 in shares of stock each year to cover basic expenses. If the market falls 50%, they’ll be forced to sell twice as many shares to get the same dollar amount. This can destroy a portfolio.

Instead, consider holding several years of living expenses in a liquid account that can be accessed during bear markets. Additionally, keep the funds required for short term goals set aside in liquid funds to avoid a situation similar to the one I mentioned above. Ordinary bonds in a portfolio can provide an extended cushion if the market is still low when these funds are depleted.

What are your thoughts on emergency funds?

 

Drafting up a 2014 budget

nzmuse 2014 budget

At last, it finally feels like we’re back on an even keel! T is bringing in an income and now that the random payroll snafu that resulted in me missing my December paycheque (I got it in January) is sorted, we’re basically all caught up financially.

So, his new job. It involved a big initial outlay; that happens when you go from the kind of jobs where you have a uniform or can wear your normal casual clothes to a white-collar environment – particularly in face-to-face sales. As much as I hate to say it, those shirts and pants and ties and shoes were an investment.

The hours are long, though – 9-10 hour days and only three days off a fortnight. (Whether this is sustainable long-term is another matter – time will tell, I guess.) Now he’s past the training month, it’s entirely commission based, so his income is 100% variable.

The big bonus is the near total elimination of car expenses. Company car, a certain amount of fuel per week, not to mention the savings on insurance, registration and maintenance. I’m super stoked, because car expenses are ALWAYS what kill us.

The most logical way to manage our money seems to be to live off mine (the regular) and save his (the irregular) – even if that makes me feel a little uneasy. There is room to still save a little from my pay, which makes me happier. Here’s my projection for our weekly expenses (yes, we pay rent weekly in NZ, for any newcomers).

  • Rent – $280
  • Groceries – $130
  • Bills – $120 (I put this amount into my ‘bills’ account for power, water, bus fare, insurance, and all those boring things)
  • T’s allowance – $80 (spending money plus lunch money – their $6 subsidised cafeteria meals look amazing and are good value – this is a small luxury of convenience for the both of us)
  • Fun money – $80 (generally consists of us going out to eat, plus room to spend $20-30 on petrol for our own use)

The big hairy goal is saving for a house, but I’ve come to realise we probably first need to save for a second car, because we won’t be able to afford a house in a convenient suburb. Much as I would like to be able to save a 20% down payment, 10% is more realistic, and can be done through a Welcome Home loan.

Finding a house for under $485,000 isn’t easy (but at least they’ve updated their price threshold – they previously classed affordable houses as under something like $300,000, which was so far off the mark it wasn’t even funny). As for the income criteria, unless T turns out to be a total ninja sales star, or some flush-with-funding startup decides they need my wordsmithing skills like I need my weekly fix of Scandal and shower me with buckets of cash, we should be safe. I try not to think about one of my old classmates, an accountant who would’ve started out making roughly the same income as me, but then doubled that in her second job (I bet she’s into the six figures now) and is only going to go up from there. I try not to think about the fact that I will probably never crack $90k in my working life, and focus on the fact that I have the dream job that I actually enjoy going to every day. But why, oh why, couldn’t my talents and interests have had more lucrative leanings? Don’t answer that.

Femme Frugality

Investing in furniture: is an expensive bed worth the money?

sealy posturepedic bed nz

I always thought that buying a house would be my catalyst for buying grownup furnishings. Quality kitchenware, a lounge set that cost more than $10 … and a new bed. (Everything else – the aesthetic stuff – I could take or leave.)

See, our old bed was actually a secondhand bed. I bought it back in 2006, when I thought I would only need it for a few months. The plan was to move into the student dorms when I started uni in 2007, which would be fully furnished. But then I changed my mind, stayed in the suburbs, and kept that old bed. Fast forward to the current day, and I’ve had that bed for seven years … and I’m not sure how old it was before that. (For what it’s worth, it’s a Sealy, which is about as good as it gets brand-wise.)

After six months in a garage, that old bed wasn’t really in the best shape. Rather than waiting until we buy a house, it seemed like a good time to replace it. Plus, my mother had given me $2000 just before we left (ostensibly a wedding present – she told me to spend it on a new bed).

Now, there are plenty of beds going for about $600/700. I’ve even seen bedroom packages for the same price, with dresser included. Heck, I actually saw a queen size bed advertised for the tiny sum of $250. But at some point, frugal becomes cheap (we didn’t go to check out that one as the retailer was really far away and T was skeptical that a $250 bed could possibly be any good).

We ended up buying a new queen size Sealy from Bedstop in Three Kings. The damage: $1000 (ouch) down from an original price of $1700 (yay!).

Personally, I can sleep on anything. I mean, I don’t love sleeping on the gap between two mattresses (which I had to do far too often in Europe, where a double bed is usually code for two singles pushed together), but I cope. I can sleep on couches, floors, hard beds, soft beds, in cars, on trains … you name it.

On the other hand, T likes a firm mattress, and has chronic back pain, though it’s eased a lot since he stopped working hardcore trade jobs. Our nightly ritual usually consists of him muttering about how he can’t find a comfortable position and eventually sinking into a fitful sleep, while I halfheartedly scratch his back for a few minutes before being overtaken by a wave of glorious unconsciousness.

If it wasn’t for him, I would probably have gone way cheaper. WAY cheaper. But his comfort is important, and a bed is not a purchase to be made lightly. Also, our new mattress is so darn cute – though I don’t get the point of putting fun prints on mattresses, since you’re never going to see them! There’s that fleeting moment when you change the sheets, but I’m generally concerned with getting that tedious task over as quickly as possible more than anything else.

What’s the most expensive item of furniture you’ve ever purchased?

Confession: Our finances are a mess right now (and I’m okay with that)

I haven’t felt on top of our finances for at least a couple of months – a feeling that I don’t usually like, but have come to a weird sort of peace with for now.

First, our iPhone died randomly in California, taking with it all our US spending data (I tracked all our spending with Trail Wallet, and since we hadn’t backed up the phone in awhile, all our info was lost within the app). I have a pretty good handle on our average daily spend though, so at some point (hopefully over the Christmas break) I can finally tally up the total cost of our entire trip.

Then we got home, where I went straight back to work and T started job hunting. We stayed with my parents for a few weeks, which saved us tons (shelter, food, even some transport). But then we found a place and moved in, which meant shelling out a bunch of money, plus more spending on replacing a few household things we badly needed. With all the upheaval, plus a lot of busy weekday evenings for various reasons, we spent more than we should’ve on eating out.

With T not working, funds were tight and I dipped into our emergency fund, since my first paycheck was eaten up by all the moving expenses.

Then this week he got a job (!!!) which I will elaborate on later down the track, once he’s started and has a few weeks under his belt, and when we have a clearer idea of how it’s going. This means that we have to go shopping for basically a whole new wardrobe for him this weekend, which I imagine will cost about $1000. Ouch.

Also, my glasses broke in a Cheech and Chong-esque incident (where we literally butted heads) and will need replacing – that’s probably another $500 or so because I’m blind as a bat and need to buy the thinnest, most bankrupty lenses available so that my face can actually support my specs without collapsing in on itself.

Basically, money has been OUT OF CONTROL and I haven’t been tracking any of it. When things are in flux, it’s always terrible for our finances. But I’m okay with our slight overspending, for sanity’s sake

I’m hoping to get on top of things over the holidays, assess where we’re at and make a plan for 2014.

Going forward, my income will be the only steady one and T’s will be entirely variable, which is something entirely new for us.

Action plan: once I finish work for the year, it’s time to stop being an ostrich about things and take stock! I’m quite excited about that, nerdy as it sounds. Fresh starts always feel good.

Loyalty pays … or does it?

Shopping around is one of THE cornerstones of frugality. Taking a little time to do your research in order to get the best deal … it’s a no-brainer.

But when do you draw the line?

I wasted far too much time early on in Europe trying to save money on accommodation. Hostels and hotels were so expensive in Brussels and Amsterdam that frankly, I may have saved a few euros, but it was a poor payoff in proportion to how much time I spent searching countless websites looking for the best price.

My go-to sites for booking accommodation are Agoda (in Asia) and Booking (Europe/North America). I also used Hotwire, Priceline and Expedia once each in the US, but by and large, Booking.com is where it’s at for me. Unlike other sites, it’s always upfront about taxes and other charges that individual places levy. And while I don’t ALWAYS check against other sites, I can’t think of any instance where I’ve found the same room for cheaper elsewhere.

(As for hostels, I always play off both Hostelworld and Hostelbookers against each other, though Booking also includes some hostels in its database.)

The convenience of booking through the same site can’t be understated, particularly if there’s a good mobile app. All your details are saved, so you don’t need to enter them every time. You know how to navigate your way around instinctively to get the information you need. And your loyalty starts to pay off – you start to get emails with special subscriber deals and exclusive discounts. I’ve booked through Booking.com so many times I now have a 10% Genius lifetime discount, although it applies to certain hotel deals only.

Loyalty pays in other areas, too. You’re more likely to get fees waived if you’re a long-time customer. You get discounts for staying with the same insurance provider after a certain number of years. You get a free coffee if you rack up enough stamps at your favourite cafe. And so on and so forth.

Personally, I’m pretty loyal when it comes to banking and insurance, but I’m a personal finance nerd. Nothing is totally sacred.

When do you go with the easier option, and when do you hunt down the best possible deal?

Funding our RTW trip

how to travel around the world nzmuse

I know a lot of you have been waiting patiently for this long-expected post! Here it is.

Travel on a budget

Travel on a budget often involves housesitting, a mainstay of RTW travellers. We won’t be staying in one place for very long, though, and we’d need to crack the market first – getting that first gig without experience is probably the toughest part.

Instead, we’ll be backpacking, hostelling, and looking for apartment/room rentals. In lots of cases, private rentals seem to be cheaper than hostels in big cities. There are sites like AirBNB and Roomorama, which have large databases but also high prices and hefty fees. There’s also plenty of others, like Wimdu, 9flats and Housetrip, which I prefer due to the no/low fees. These range from shared apartments to full private apartments, but at the very least you’ll generally at least get a futon to yourself. Some rentals may charge huge deposits/bonds/cleaning fees, or extra fees for extra guests. I would just browse listings on all the sites and see what catches your eye on a case by case basis. Most of them are easy to use – you can search by date, area, sort results in list format or view on a map, and some display reviews on the page and even an availability calendar.

Then of course there’s Couchsurfing, though I’m aware that as a pair we may find it difficult. New Zealand is a land of houses, but I know tiny apartments are the norm in lots of cities around the world. In scouting out potential hosts overseas, it became obvious that many, many hosts can only accommodate one guest. That said, we’re also open to staying further out in the suburbs – that’s just an opportunity for another experience entirely. (You can read about my experiences as a Couchsurfing host here.)

Finally, there’s volunteering. Hosts shelter and sometimes feed you in accommodation for your labour, which could range from helping out on a farm to cleaning or even more creative pursuits like graphic design or photography. Look on sites like HelpX, Workaway, WWOOF, GlobalHelpSwap and Staydu. To sign up as a member, you’ll usually be charged a fee that gives you access for a year, and freedom to contact as many hosts as you want.

 

Budgeting for a RTW trip

I read a lot of RTW blogs and have looked at a lot of travel budgets (Legal Nomads has a large list of links to various bloggers’ travel budgets here).

I’ve also combed through Budget Your Trip, a super handy website that aggregates costs from real travellers. Obviously, any crowdsourced data is only as good as those who partake, so costs are likely to be more accurate in cities that are well trafficked. On Budget Your Trip, you can see budget, mid range and luxury budgets based on real data, in local or other currencies.

Costs are going to vary a lot by region. Asia will be the cheapest and Europe probably the most expensive. I’m hoping we can average out to $100 a day over the whole trip, though I’m also accepting of the fact we’re very probably going to blow through that at times.


Funding a RTW trip

There are two parts to this equation.

Savings is pretty self-explanatory. You’re all grownups; you know how to save money (at least in theory, even if you’re not quite as good at it as you might like to think). Savings = income – expenses. To break that further down, you can cut costs, increase income (which I tend to be better at), or both, in order to maximise that gap.

Expenses so far have been about $10k. Thankfully, we got a killer discount on our backpacks and some other gear (nearly 50%) this month due to T’s staff discount at Fishing Camping Outdoors. There are probably more I haven’t included below (eg travel adapters and other bits and bobs).

expenses pre RTW trip

At this stage, there should be enough in the kitty to cover a $100/day budget, once I get my leave paid out, given that we’re spending a month volunteering. Odds are we’ll spend more than that in some places, so…

Income is the other half.  I’m aiming to keep some money flowing in while we’re on the road, which hopefully will have the added bonus of keeping my skills sharp. How?

Blogging

Where print ads typically cost more than a month of my salary, online advertising is absolutely buggered. For all that digital offers (interactivity! measurement! mobile! targeting!) I don’t know if it will ever catch up. Ideally, ads would flow in and help fund this blog, with me only needing to worry about editorial and keeping you guys interested. Unfortunately, traditional advertising just isn’t working anymore. Advertisiers want more integrated and sophisticated solutions. THEY WANT EDITORIAL. That means rather than being relegated to banners and sidebars, they want in content links, for example. Sometimes this is more lucrative than a plain ad but it’s a lot more work for us. At a company, you can generally leave that to the ad sales guys; as a blogger you have to be much more involved.

Er, my point? Online advertising is tough. That said, where possible, I will continue to try to monetise the blog – without selling out, that is.

I never wanted to make blogging a business. I have no desire to get to the point of bringing on staff writers – this is and always will be my personal blog – paid speaking gigs (shudder – I can’t think of anything worse than public speaking), or coaching (again, no desire to be a life coach). But I am grateful for the opportunities that it has brought. Which leads me to…

Freelancing

Yes, there really are jobs where you can travel the world and work from anywhere – the kinds of jobs where you can earn an income as long as you have a computer and internet connection. Technically, I can work remotely, but the reality of my particular workflow and daily local deadlines means keeping up my workload while constantly on the move would be, er, challenging. And I’m more than happy to take a bit of a break.

So I suppose I’ll be joining the hordes of digital nomads out there … to an extent. The plan is to do *some* work while on the road. Exactly how much I am not sure, but less than full time.

Want a piece of me? I’m available for select content-centric work, so if you’re in need of a
kick-ass freelance blogger, freelance ghostwriter, or freelance editor, drop me a line.

One last note

I’d be remiss if I didn’t mention a couple of things that make this possible:

  • No commitments. That means no mortgage, no kids – living in a crappy house with hand-me-down furniture (not that I care about that, but I’m MAKING A POINT here!)
  • No/minimal debt. That means no student loan, no car loan, etc.

I’m a big believer in keeping your fixed costs low and committing to as little as possible. That’s allowed us the flexibility to do this relatively painlessly. Figure out the puzzle pieces and set yourself up for success.

Whatever your goal – travel, buying a house, having kids, moving to another country – it’s doable if you truly want it and commit to making it happen.